RBI MPC Announcement - Feb 5, 2021 - Acuité Ratings & Research

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

"The decision of the MPC to hold the key policy rates and maintain the accommodative monetary policy is in line with market expectations. While the Union Budget 2021 has laid down an expansive fiscal strategy over the medium term to strengthen the growth engine in the economy, RBI has affirmed its support to such a plan through appropriate monetary tools. Some of the measures to absorb higher government borrowings include the direct participation of retail in the g-sec market and a further extension of time for the increased 22% HTM limits for SLR holdings upto March 2022. Nevertheless, RBI has highlighted the need to be cautious about core inflation given the cost push pressures visible of late such as higher fuel and industrial input prices. Among the developmental measures announced by RBI, the inclusion of NBFCs in the on tap TLTRO scheme, the incentive to banks to lend to new MSME borrowers through a lower CRR requirement and the further deferment of the increased capital requirements under Basel III, will facilitate higher lending to smaller businesses and thereby, encourage quicker revival of the economy."

Source : Equity Bulls

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